Limited near-term upsides for Yinson despite healthy order book

KUALA LUMPUR: Yinson Holdings Bhd's earnings could be dragged down by the gestation period of its new project with limited upsides over the near term.

However, the company net gearing reduced significantly to 0.4x from 1.2x in 1QFY19 with the issuance of perpetual Sukuk Mudharabah Programme in
2018 worth RM950mil.

"This provides Yinson more room to gear up and bid for new FPSO projects," said BIMB Securities Research.

The research house said Yinson's orderbook is strong at US$4.3bil inclusive of the FPSO Helang project.

It expects the order book to expand by at least another US$1bil upon finalisation of the head of agreement with the first E&P company for the Anyala and Madu FPSO project.

Announcing its earnings results yesterday, Yinson's 2QFY19 core profits fell 29% year-on-year to RM79mil mainly on continued lower charter rate from FSO Bien Dong and FPSO Lam Son.

The commencement of the FPSO JAK charter also saw higher interst charges.

"For the same reason, 1HFY19 core earnings dropped 23% yoy to RM140m and came within ours and consensus’ estimate at 45% and 49% respectively," said BIMB Securities Research.

Yinson declared an interim dividend per share of four sen, which implies a payout ratio of 4%.

BIMB Securities Research maintained its hold recommendation on the counter with an unchanged target price of RM4.55, which implies 14.5x FY18F price-earnings.